Thanks to IT – the time limit for re-opening of assessment reduced to 3 years
The Current fiscal Budget has lowered the time limit for reopening of tax cases to 3 years from 6 years earlier. While for serious tax fraud cases involving income concealment of 50 lakh and above 10 years old cases can be reopened. Taxpayers will be informed upfront about the reasons for which their I-T returns are getting reopened for scrutiny.
Prior to the amendment in the Budget 2021, Income Tax Department had the power to reassess previously filed income tax returns, upto i) 4 years from the end of the relevant assessment year, where income escaping tax is less than 1 lac; ii) 6 years from the end of the relevant assessment year, where escaping tax is likely to be 1 lac or more; iii) 16 years from the end of the relevant assessment year, if the income in relation to any asset located outside India is escaping tax.
Re-opening of previously filed returns / completed assessment and re-assessing those returns, had been causing a lot of hardship. Such a long period was a cause of lot of uncertainty in the minds of tax payers. It resulted in lot of trouble tracing old documents and providing explanation of such old transactions.
Some years back, such re-opening was not a normal phenomenon, as notices for re-opening were issued in case of receipts of information in some search cases. Also the exchange of such information manually done, lacked lot of discipline.
With advent of information technology, lot of such notices for re-opening were getting issued as I Tax was able to access lot of information for various transactions like securities dealings, property purchases & sales, credit card expenses, foreign travel, electricity bill & hospital bill payments, etc. Such transactions previously went unnoticed. Although it helped I Tax to bring in tax net, many non-filers, there was a lot of hue & cry about such notices being issued for older periods up to 6 years, as the information was now available with I Tax realtime as a result of linking of PAN & Aadhar with almost all financial transactions. The investigation into any such financial transaction was possible realtime without having to wait for so long to issue such notices.
Realising the issue, Budget 2021 has reduced the time frame for re-opening from 6 years to 3 years which come as a relief for tax payers who should be thankful more to the developments in Information Technology than to the tax authorities.
